In recent years, the cost of data center construction has been on the rise due to a confluence of factors. On one hand, there’s a skilled labor shortage which has resulted in higher wages. On the other, 90 percent of major construction projects face scheduling delays and cost overruns, which adds more and more expenses to each project, according to McKinsey.
Making matters more complicated is the emergence of COVID-19, which has disrupted global supply chains and increased the cost of many building materials.
According to the U.S. Chamber of Commerce, the average data center costs $215.5 million to build and includes 165,141 net rentable square feet. Here’s how the costs break down:
- IT equipment – $157.1 million
- Land acquisition – $13.4 million
- Construction – $45 million
As the demand for data centers continues to increase, organizations are looking for more cost-effective methods for construction. But before we examine how they’re doing that, let’s take a step back and look more granularly at how data center costs break-down.
Your data center is going to require a good deal of IT equipment, including racks, servers, switches and routers. These devices will need to be connected by cabling, which means you’ll be investing in network infrastructure, software and computing components as well.
Though you might be able to receive some sort of discount on a bulk purchase, how much you spend on IT equipment will depend on the size of your data center, your company’s needs and your company’s preferences. While one organization could want nothing but top-of-the-line equipment, for example, others may prefer to take a more economical approach to computing resources.
There’s no right or wrong answer here; it’s up to your organization. Whichever route you take will determine what costs are added to the final tally, and that’s just for equipment.
In an ideal world, your organization would already own the land that you want to build a data center on, and you would have purchased it years ago at what’s now considered a bargain price.
But not every company is that lucky.
When it comes to the decision about where to build your data center, rural areas tend to be a better option than urban areas. In fact, CBRE estimated that building a data center in expensive areas such as Boston and Silicon Valley could be 45 percent higher than the cost of construction in less expensive areas such as Tulsa and Charlotte. Additionally, if your data center is big enough, you may even qualify for tax incentives for bringing job opportunities into the area.
Keeping your initial costs down shouldn’t be the only thing you consider when building your data center. You need to plan for how you will keep your data center operational once construction is complete. Often, rural areas don’t offer a robust infrastructure that an urban area would, including access to reliable electricity or internet access. This could lead to increased costs over time.
Depending on your organization’s unique needs, colocation is another option you can explore to host your data center and cut down on costs. Colocation doesn’t require as much of an investment upfront because you are renting a facility. This means that both land acquisition and construction costs can be minimized. The tradeoff is that you’re fully entrusting your organization’s operational availability to another organization, which comes with its own set of risks.
Microsoft and Forrester Research estimated that the cost of building the shell of a data center is approximately $200 per square foot. However, there are many other components that will add to these costs, including taxes and building permits. This adds an extra $70 per square foot to the price tag.
The actual construction of a new data center is often the longest step in the process, and the timeline of how fast it can be completed depends on a variety of different factors, including your ability to source labor, weather delays, change orders and unforeseen circumstances, such as the COVID-19 pandemic. Unfortunately, the more delays you add to your construction schedule, the more costly your data center project will become.
Keeping Data Center Costs Low with Modular Construction
When it comes to building data centers economically, construction is where you’ll find the most significant savings. This is why more and more companies are opting to take the modular approach to construction, instead of going the more expensive, traditional stick-built and on-site route.
How much does a modular data center cost? With this approach to construction, data centers can be deployed much faster and for less money. A traditional data center construction project can take as long as 24 months, but you’ll get up and running as much as 30 percent faster by going with a modular data center. That’s because there’s less time spent on approvals, permits and site prep, among other benefits.
Because of economies of scale and expertise, modular data centers are up to 30 percent less expensive to build than traditional data centers. All construction is done off-site in a climate-controlled facility, and your data center is designed to meet your organization’s specific requirements right out of the gate.
To learn more about modular data centers and to determine whether they make sense for your company’s unique needs, check out our free e-Book, The Complete Guide to Modular Data Centers